ETFs: Better, and Worse, than Mutual Funds

With their lower expenses and tax advantages, exchange-traded funds can outpace mutual funds. Unfortunately, many investors get lower returns with ETFs. Here's why.

This transcript has been automatically generated and may not be 100% accurate.

I ... while exchange traded funds are arguably on better vehicle for investing in mutual funds ... the people who own them ... actually lower returns ... and Jack otter Editor Barron's dot com ... Brendan Conway rights are Focus on Funds blog ... so but it sounds like a Riddle ... first of all can you explain the statistic that you ... gave your most recent Barron's columnist a lot of attention on Twitter ... yes and check the statistic is how often do investors kept in ... their brokerage accounts and you might think that this is not significant but ... it turns out that there are differences ... if you use e g apps ... among Vanguard customers has decided that they did ... about thirty six percent of ETF users check your brokerage account every day ... if you only have neutral funds is less than half of that ... is important because obviously if I'm going to check my account ... and see changes on the matter the itchy trigger finger not be much more likely to want to do something in response to whatever is happening right now in the market ... of course that's never accurate ... no it's not a new note that picture really is the key point is that if you're checking in every day in a checking it just in time to have a look like ... because I don't go hang on a Krispy Kreme when he did actually being there to do things to trade ... ever sold at an academic study after study shows that trading harms your times it's expensive for so called second of all weekend and human emotion and so what's going down but whats going up when that's exactly the opposite we should be doing now ... so here's the irony you also point out ... an exchange traded fund in some ways is superior to neutral fund us to do it ... the fun zone the same thing ... in let's say for the sake of argument to have the same expense ratio even there ... the CIA will not be adjusted this is actually the flip side of one of the fears lately about about the ETF structure ... which is that in a panic it tends to ... fall a little bit below the portfolio value ... that's when the features of ETF and that's because his only people are selling the ETF so ... aam strongly that that that that falls faster than the stock's announced yet that's right so if you think about who was paralyzed by selling the environment is just the person who sells ... them ... switch gears and think about and an index people find where ... you actually get your money back and ended the day ... you're entitled to the portfolio value there ... so if people are selling on once in the Manchester telco stocks in the day who bears the Cox beaches everybody in the industry to fund ... the ETF ... makes the hot money pay their own way ... is within mutual fund the manager has to trade ... and so therefore Uber that expense and presumably he drives down the price the stock of all the right to so that so that her sit ... well with ETF long just long ... makes a difference in fact if your guy investor tissue could jump in at those moments of panic and buying ETF for a little bit less than the value of the underlying shares get a little live in it but obviously the key being value investor ... in the making your decision on that that will fit but surely all else being equal that are holding for twenty years ... a comparable